When setting up a business, there are several governmental regulations of course. Upon fulfilling those regulation and requirements, one can carry out their business in this nation. One of such regulation you need to come across first is choosing the right company structure in Malaysia.
Yes, Malaysia offers various business structures among which you need to choose your company type first. Sole proprietorship, Partnership Company, SDN BHD or limited liability companies (LLC) are the three most popular company structures in Malaysia. Here in this article we will deal with the sole proprietorship Malaysia and also figure out how it is different from that of a SDN BHD or limited liability company.
Malaysia allows various business strategies for entrepreneurs. The nation has all corporate amenities and social facilities that a business person asks for when reciting in Malaysia. This makes the country one of the most enticing center for investors all around the world. Naturally, you can expect hard competition too, no matter wherever you want to step in into the Malaysian corporate environment.
When you are up for a business you first have to decide which business plan is preferable for your company in Malaysia. If it is a sole proprietorship the company procedure is different from that of sdn bhd or partnership business. Let’s have a looks on the Sole proprietorship Malaysia.
Registering a sole proprietorship in Malaysia
Before registration process one must understand what a sole proprietorship Malaysia actually means; Sole proprietorship is a type of business where the whole business is owned by a single owner, there will be no partners or shareholders.
The business will be set using that single owner’s personal name as per his / her identity card or trade name. To incorporate a sole proprietorship business in this country, an entrepreneur needs to follow several steps. Following are the steps that must not be skipped during sole company registration process:
- The registration process for this type of company demands only a single owner. No partner or any representative of the owner can initiate the incorporation process of sole proprietorship.
- The registration process must be completed at least 30 days before the first commercial activity of the business.
- The registration of this type of business need to be carries out at any nearest SSM office in Malaysia. This can however, be done entirely online via Ezbiz Online services (ezbiz.ssm.com.my).
- For the core registration process, the owner need to fill up a Form A. the form will ask for owner name and credentials followed by company name and credentials and nature of the business. The initial task of company incorporation however, is fixing and registering trade name. This can be the owner’s name, or a unique business name; In case of a unique business name Form PNA.42 must be filled up according to the guidance.
- Once done the form is submitted to the SSM via manual submission to the SSM counter or online form submission process through Ezbiz Online services.
- The validation of this company registration is at least 1 year to up to 5 years.
- Sometime the owner is asked for a Letter of approval from Government Agency.
Fees chart for Sole proprietorship business
There are some charges owner needs to pay at regular yearly interval to maintain the trade name and if a new company branch needs to be opened. The table below illustrates that minimum government fees for sole proprietorship business:
|Service||Charge (RM)/ year|
|Business trade name||60|
|Opening of company branch||5/ branch|
Benefits and drawbacks of a sole proprietorship business
Sole proprietorship Malaysia comes with various facilities and few baggage’s as well. This is obvious for all businesses, where company gives you various facilities; in exchange you need to handle few drawbacks. Sole proprietorship may sound simple and linear and has various facilities, but drawbacks are present as well. Let us scan out those pros and cons on this type of business in Malaysia.
Benefits of Sole proprietorship in Malaysia
- You are the sole owner, so you will enjoy all the benefits and profits made by your company and need not to share with anyone.
- Sole proprietorship Malaysia comes with enticing policies where the owner of the company doesn’t need to corporate tax.
- The cost evaluation is marginal and way lower when compared with other form of business in this nation.
- Annual auditing is less complex and doesn’t require separate company secretary. In other words, less corporate formalities and most cost efficient.
- The incorporation change is least compare to other company formation.
- If needed owner can easily Chang company formation from sole proprietorship to other company form.
Drawbacks of Sole proprietorship in Malaysia
- As you are the owner and enjoy the full profit of the business, you are also liable for the full losses and debts made by the company.
- You need to pay self employment tax
- Raising capital for the company is much difficult as only you have to bare the whole expenses.
- The company dissolves soon after your death or expiration.
Difference between sole proprietorship and Sdn Bhd
How Sole proprietorship is different from SDN BHD? By now you got a clear idea about sole proprietorship business in Malaysia. You also know how registration can be done and what are the pros and cons of this type of company in Malaysia. Now let’s move one step further and compare sole proprietorship Malaysia with SDN BHD Malaysia and find out the existing differences between them.
Profits and Liability
First comes the liability sector of these two business types; owner of a sole proprietorship business is liable to all the losses and debts made in the company. However the profits are all enjoyed by the single owner too. On the other hand, SDN BHD comes with limited liabilities. Here the liability is undertaken by the company which acts as an individual entity in the company, and therefore owners are not fully liable of the losses made. Profits are in a same way well distributed among company shareholders or partners.
The sole ownership company in Malaysia owns by a single person, so no hierarchy comes in this scene. He or she is solely responsible for all the activities in the business and doesn’t need to obey or are not subjected to obligate to anyone for the company activities. SDN BHD on the other hand follows superior managements, and board of directors. The decision of any kind related to the company cannot be taken solely and must be discussed via standard meeting procedures with other designated personnel and co owners in the company.
The taxation process is much linear in case of sole proprietorship than that of SDN BHD. The trade tax or corporate tax is fully subsidized in sole ownership business. However the owner needs to pay a self employment tax. In case of limited liability Company in Malaysia standard corporate tax is applicable, and need to pay on time. So such company need to structure a tax plans to keep the taxation process clear.
Here SDN Bhd gets an advantage point as in this type of company, business continuation is very much possible if an individual owner or director leaves the company or expires during running of the company. The deeds, MoA and AoA are made keeping in mind this type of uncertainty. In case of single ownership business in Malaysia, this is not possible as the company is owned and managed by a single person. Therefore, if the owner dies, the company gets dissolved as well.
Business establishment cost
Lastly, the cost evaluation suggest that sole proprietorship Malaysia takes very less expenses to run the business in contrast to the business establishment and running cost needed for the SDN BHD in Malaysia. The cost of running sole ownership business is almost negligible, no; company secretary or other company recruitment is needed if business doesn’t ask one.
The establishment cost is less and governmental requirements are also negligible in Sole Ownership Company. However, this is not the case for Limited liability Company; here hiring a company secretary is mandatory by the company law of Malaysia. Such companies need to deal with the expenses such as employers’ salaries, allotment cost for business premises, purchase office equipment and other mandatory expenditures.
FAQ on Sole Proprietorship
What are the steps of starting a sole proprietorship in Malaysia?
Here are the sole proprietorship company registration steps:
- First. Complete the SSM Form A. You can collect that from the nearest SSM office. You need to provide your IC photocopy to get the form.
- Carry out the trade name Search process and submit name proposal to the SSM. SSM officer will check and verify the name availability and approve or propose other business name.
- Clear the annual payment to the designated counter
- Submit the form to the SSM counter and you are registration process is done.
- You can also carry out the same process online via Ezbiz Online services at ezbiz.ssm.com.my. This process is more convenient.
What is a sole proprietorship in Malaysia?
This is a simplest business type in Malaysia, where a single individual registers and owns a company. As a result, he/she manages this whole company by his/her own and enjoys the benefits and liabilities by his/her own as well.
Can the owner hire employees in sole proprietor in Malaysia?
Yes, despite sole proprietorship is all about a single owner, where business is managed and run by an individual person under the Businesses Registration Act 1956, but if the owner requires, he/she can hire employee employees in the company.
From where can I register for the sole proprietorship in Malaysia?
The sole ownership business can be registered from the nearest SSM counter by submitting Form A and other recommended documents, or by online registering via Ezbiz Online services at ezbiz.ssm.com.my.
What is the difference between sole proprietor and Sdn Bhd?
The only big difference between sole proprietorship (single ownership), partnership and private limited companies is in the ability to protect business owners from legal liability in case anything goes wrong. If you set up your business as an Sdn Bhd, you and your shareholders will be protected by the corporate membrane. And the other hand, A sole proprietorship is businesses which are owned by just one individual. Owners of sole proprietorship experience unlimited liability.
Things you must know for registering a sole proprietorship
Steps to register a sole proprietorship in Malaysia
For Sdn Bhd
What is Sdn Bhd? Sendirian Berhad in Malaysia
How to register a partnership in Malaysia?